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06/05/2014

Economic Publications

Corporate Payment Trend and Sectorial Risk in Asia Pacific

Such momentum partly came from the dividend of economic bloom of the 2 biggest emerging markets, China and India, during the past decade. However, with growth outlook of these two countries notably lower than the long-term growth trend, Asian economies are by no means not facing zero headwind, and businesses in these economies may need to form different sets of strategies heading into such waves of change.

For businesses practitioners, one of these challenges is to keep the growth momentum going while not losing their assets on bad debts; but the task would not be easy. Due to the ‘‘developing’’ nature of the Asian economies, insolvency data is very difficult to come by to say the least. As a result, we used the annual payment survey result in this report to chip in as a dimension when we look at the economic situation in these economies.

For Asia as a whole, roughly 68% of the respondents told us that they have faced overdue situation in 2013 (compared to 67% in 2012) and overdue situation has moved slightly toward the long-end. Moreover, while only 30% of the respondents shared that long-term overdue (i.e. at least 180-days) has weighted more than 2% of their annual turnover in 2013, signaling an improvement compared to the 37% respondents in 2012. Such results point to a stabilized corporate payment experience in Asia in 2013.

Specific trends of economic development, corporate payment experience, and industry payment experience review in various economies are discussed in this report.

On the ground

In the absence of straightforward economic data we can use to trace the evolution of corporate payment behavior in most emerging Asian economies, Coface (Asia Pacific) conducts surveys in various economies to better lay this out for our clients. Although the study is by no means exhaustive, this report is designed to be a point of reference for us to take a look at the economic and business environment in these economies, as we explain our rationale utilizing the survey result as well as different macroeconomic and microeconomic indicators.

Corporate payment experience in Asia Pacific

According to the survey respondents, there are a higher percentage of companies having offered credit terms to the customers in 2013, comparing to 2012. When asked whether or not they have offered credit terms to their customers over the past 12 months, 85% of the respondents told us that they did so, comparing to the 82% in 2012. Told by 52% of the respondents (vs. 51% in 2012), market competition remains as the main reason why sales on credit terms were extended to customers in 2013.

Analyses of different economies: macro, survey result, and key industries

Stage of development, corporate payment behavior, and economic outlook – among the others – are very different in various Asian economies. While the overall picture of the combined result would provide us with a good overview of how the credit payment experience has evolved in surveyed economies, combined, has evolved over time, we may need to look deeper into results from individual economies to get a better sense of what is happening on the ground.

CONCLUSION

From the hawk’s-eye view, Asia’s economic growth momentum remained strong in the post-crisis era, with Asian Development Bank’s most recent forecast pointing to a 6.2% and 6.4% YoY growth for 2014 and 2015, respectively

27, while Coface expects Emerging Asia to grow 6.1% in 2014. Such momentum partly came from the dividend from economic bloom of the 2 biggest emerging markets, China and India, during the past decade. However, with growth outlook of these two countries (China 2014 growth forecast: 7.2%; India 2014 growth forecast: 5%) notably lower than the long-term growth trend – average growth of 10.6% in China and 7.8% in India between 2000 and 2011 – these economies are by no means not facing zero headwind, and businesses in these economies may need to form different